How to Exercise an Option to Purchase

March 14, 2019 Rebecca Rauws Estate & Trust Tags: , , , , , , , 0 Comments

Sometimes a Will may include an “option to purchase” clause. Basically, this type of clause will provide that a particular person shall have the option to purchase a particular asset of the estate, for a particular price. Usually the option will end after a certain period of time, to allow the estate to continue being administered, depending on whether the person decides to exercise the option. Typically, options to purchase will play out in a fairly straightforward way—either the option is exercised, or it expires. However, in the recent decision in Crawford v Culbert et al, 2019 ONSC 1048, the chain of events was not quite so simple.

Hannah died in February 2018, and was survived by her four children: a son, Terry, and three daughters, Tammy, Tracey, and Tina.

At the time of Hannah’s death, the four siblings were not specifically aware of the contents of Hannah’s Will. A few days after Hannah died, they located an unexecuted document that appeared to be a Will, which Tina read out loud. The Will contained a provision that Terry would have a first option to purchase a farm property owned by Hannah’s estate, for $200,000.00, and that he had a period of 30 days “from the date that express written notice” of the option is given to him. At that time, it was unclear whether the Will had been executed.

The next day, the three sisters obtained a notarial copy of the executed Will from the law firm that had prepared it, but did not provide or show a copy to Terry. Some text messages were exchanged between Terry and Tammy about a month later, in which Terry commented that he did not intend to purchase the property. A short while after that, all four of the siblings met at the office of the lawyer who drafted the Will. It was at this time that Terry learned that Hannah’s Will was in the same form as the unexecuted document the siblings had located following her death. Twenty days later, Terry advised the lawyer that he intended to exercise the option to purchase. Both Tracey and Tammy took the position that Terry was out of time to exercise the option.

The court considered what constituted “express written notice” as required by Hannah’s Will. It easily concluded that Tina’s reading of the unexecuted Will did not constitute express written notice. The court also found that the earliest date that the 30 day period could have commenced was the day that all four siblings attended at the lawyer’s office, and Terry learned that the Will had been executed. Additionally, the court found that nothing Terry said or did prior to the date of the lawyer’s meeting could be considered an effective waiver of his entitlement to the option.

This decision may serve as a reminder to anyone who encounters an option to purchase that being crafty to try to circumvent the option is unlikely to be successful.

Thanks for reading,

Rebecca Rauws

 

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